Since March 2020 we have adopted temporary measures on the requirement for firms to issue 10% depreciation notifications to investors. This requirement arises from Article 62 of the MiFID Org Regulation as reproduced in COBS 16A.4.3 UK.
The measures were put in place initially to help firms support consumers during market volatility linked to coronavirus (Covid-19) and the Brexit transitional period. We said we would show supervisory flexibility to firms’ ongoing compliance with the requirement so long as certain criteria were met.
In 2021, we announced that we would maintain the temporary measures until 31 December 2022 while the Treasury carried out policy work on the future of the requirement as part of its Wholesale Markets Review (WMR).
The Treasury has now laid before Parliament a statutory instrument (1297/2022) revoking Article 62 of the UK version of the MiFID Org Regulation. This legislative amendment is expected to come into force in January 2023.
We have decided to extend the temporary measures for firms during the interim period, pending the revocation of Article 62. We will not take action for breach of the notification requirement reproduced in COBS 16A.4.3UK provided, in each case, the firm meets our conduct expectations as set out below.
Conduct expectations: services to retail investors
A firm providing portfolio management services to a retail client is expected to:
- Issue at least one notification in the current reporting period, indicating to the retail client that their portfolio or position has decreased in value by at least 10%.
- Inform the client that they may not receive similar notifications should their portfolio or position values decrease by a further 10% or more in the current reporting period.
- Direct the client to non-personalised communications providing general updates on market conditions. These updates, which may be provided via public channels such as the firm’s website, should aim to contextualise changes in portfolio or position value so as to help the consumer make a considered decision about their investments rather than act on impulse.
- Remind the client of how to check their portfolio value, and how to get in touch with the firm if they wish to obtain further information or seek advice.
Firms are reminded of their obligation to pay due regards to the interests of their customers and treat them fairly (Principle 6), pay due regard to the information needs of their clients, and communicate information to them in a way which is clear, fair and not misleading (Principle 7).